AT&T’s Run-Ins With the Government

AT&T, one of the world’s largest telecommunications companies, figures prominently in the annals of antitrust law.

Since the late 19th century, under various names and configurations, the entity once known as Ma Bell has often been targeted by regulators trying to rein in its size and keep it from amassing monopoly power.

Now, AT&T is facing off against the Justice Department again, this time over its proposed $85.4 billion takeover of Time Warner. And although the details are different, the current situation is a reminder of the complicated balancing act the government must strike in regulating ever-changing companies.

“AT&T has been a dominant company from the very beginning and has sought to maintain its dominance through varying government interactions,” said Gerald Brock, a former Federal Communications Commission staff member who is a professor of public policy at George Washington University. “That’s been the sense of AT&T through the ages — that they seem to have a lot of power, but people also want to be able to communicate in a way that AT&T allows them to do.”

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With Bell’s Invention, a Company Is Born

Alexander Graham Bell receives two patents for his telephone. A year later, the Bell Telephone Company, the precursor to AT&T, issues stock to seven shareholders. In 1881, the company acquires Western Electric Company, a supplier of telephone equipment.

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Bowing to Trustbusters

AT&T averts an antitrust suit by agreeing to get out of the telegraph business and offers long-distance service to independent telephone companies.

The context: AT&T dominated the growing industry of electronic communication early in the 20th century, not just through telephones (it squeezed independent telephone companies by limiting their access to Bell’s superior long-distance service) but also through telegraphs, with its controlling stake in Western Union.

The result: The telegraph business was already giving way to telephones, so the sale of the Western Union stake was not a big loss. Opening up AT&T’s long-distance lines to independent telephone companies satisfied regulators who were seeking greater efficiencies, but it also made the companies more dependent on the Bell System service.

1956

Concessions in an Antitrust Case

AT&T settles an antitrust lawsuit by agreeing to stay out of the burgeoning computer industry. It also agrees to generally license its patents — opening the door for transistors, invented by Bell Labs in 1947, to spread far and wide.

The context: The lawsuit, filed in 1949 by the administration of President Harry S. Truman, sought to break apart Western Electric, the Bell System’s manufacturing arm, from the parent company. Western Electric was overcharging AT&T, the government argued, and so was forcing telephone customers to pay higher rates. It also charged that technological innovations developed within the Bell Labs monopoly were being kept under wraps.

The result: The Bell System was still a powerful monopoly, virtually the lone source for telephone service in the United States, but it would be denied the chance to develop the next big shift in telecommunications: computers.

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1982

The Demise of ‘Ma Bell’

AT&T ends a seven-year-old antitrust case by agreeing to disassemble itself into several independent pieces, essentially breaking apart the monopoly it had enjoyed since early in the century.

The context: Technology developed outside the Bell System had been gnawing at AT&T’s monopoly for years. Microwave towers, for example, could transmit signals, circumventing the Bell System wires. A 1968 regulatory decision allowed independent companies to connect to AT&T’s network. AT&T, meanwhile, was eager to shed the prohibition on computer work it agreed to in the 1956 antitrust settlement.

The result: Some pieces of the Bell System would be swallowed by other corporate entities, while others, such as Verizon, would be huge successes in the new landscape. AT&T, a shadow of its former self, was eventually acquired by a former “Baby Bell,” SBC Communications (formerly Southwestern Bell). The new combination become AT&T Inc.

The context: AT&T was hungry for more radio spectrum, which carries wireless calls and data, as smartphones became must-have devices. Adding T-Mobile would have helped solve that problem, and would have made AT&T the nation’s largest cellphone service provider. Spearheading the merger: Randall L. Stephenson, in his first big strategic step since becoming AT&T’s chairman and chief executive in 2007.

But the Obama administration said antitrust oversight had gotten weaker in recent years and strongly objected to the deal, saying it would result in higher prices and less innovation. The Justice Department was joined in opposing the merger by several state attorneys general and the Federal Communications Commission, which published a lengthy report laying out its concerns.

The result: The failure of the deal was a major setback for AT&T’s growth plans and left the company scrambling for a new solution to its network constraints.

The context: A few years after failing to acquire a cellphone rival, AT&T was seeking to tilt the balance of power with media companies as the market for broadband internet and video shifted.Fourteen months later, after executives at both companies made their pitch to Congress, federal regulators approved the acquisition.

The result: The combination of AT&T, one of the country’s largest telephone and internet providers, with DirecTV, the country’s largest satellite provider, was the biggest media merger of the year and created the country’s largest television distributor, with about 26 million subscribers, surpassing Comcast.

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2017

The Justice Dept. Fights a Merger

The Justice Department opposes an $85.4 billion deal between AT&T and Time Warner, saying the merger would create a communications and media behemoth unrivaled in its ability to reach most American homes.

The context: In October 2016, AT&T moved to expand again, making an offer for Time Warner, owner of HBO and CNN. The offer was considered to create a new colossus capable of both producing content and distributing it to millions with wireless phones, broadband subscriptions and satellite TV connections.

The deal immediately drew skeptics, including, on the presidential campaign trail, Donald J. Trump, who said the day it was announced: “It’s too much concentration of power in the hands of too few.”

At center of the dispute is the notion of a “vertical” merger, in that it involves two companies with different functions, a contrast to the scuttled “horizontal” merger of AT&T and T-Mobile.

The result: In an interview early this month, weeks before the suit was filed, Mr. Stephenson said a significant vertical merger had not been challenged in 40 years.

He added that the company had been preparing to litigate its case since “Day 1.”